The IFS also show how the structure of income tax is changing – meaning more people are paying more.
When the additional rate (the top one) was introduced in 2010 only around 200,000 people paid it, they explain.
Now anyone earning over £100,000 will pay at 60% on incomes up to £125,140, and at 45% over that. Altogether 4% of adults, around 2 million people, will be paying income tax at 60% or 45% by 2027-28. That’s more than were paying the higher 40% rate back in 1990.
Meanwhile the IFS expects there to be nearly 8 million people paying at that 40% rate.
IFS chief Paul Johnson added that the UK is reaping the costs of a long-term failure to grow the economy, the effects of population ageing, and high levels of past borrowing.
“After years of stagnation household incomes are set to fall and then recover only gradually, while taxes rise and public services continue to struggle.
“The truth is we just got a lot poorer. We are in for a long, hard, unpleasant journey; a journey that has been made more arduous that it might have been by a series of economic own goals. Mr Hunt appears to have recognised this.
“After years of cakeism, his colleagues, the opposition, and we the voters need to take that fact on board too.”
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